Four little words could kill Obamacare

By A. Barton Hinkle

Published Nov. 17, 2014

"Established by the State." Those four little words could be the undoing of Obamacare.

The Supreme Court has agreed to hear King v. Burwell, a case challenging the government's authority to subsidize insurance purchased on federal health-care exchanges. In the view of Obamacare's critics, the question at the heart of the case is simplicity itself: One section of the Affordable Care Act stipulates that insurance subsidies shall be provided in any exchange "established by the State." Federal exchanges are not established by the state. Therefore, the federal government cannot subsidize policies bought on exchanges in the two-thirds of states that did not set up their own exchange. Washington has been doing just that up to now, thanks to the IRS' contested interpretation of the law.

If the court agreed with the law's critics, then millions of Americans would find themselves forced  by the ACA's individual mandate  to buy policies they cannot afford. That would be devastating to them and, ultimately, to the ACA.

Obamacare's defenders hotly contest this reading of the law. They say it is simply a drafting error  a bit of sloppy wording that should have been tidied up before passage, but wasn't. They contend Congress clearly intended every eligible citizen to receive subsidies, so it would be the height of judicial activism for the high court to rule otherwise based on a glorified typo.

In support of that view, the law's defenders have cited both members of Congress and congressional staffers who claim they meant all along for everyone to get subsidies. And they have a powerful ally, at least in theory, in Supreme Court Justice Antonin Scalia. He has written that courts should read laws in a manner that "does least violence to the text," and that "there can be no justification for needlessly rendering provisions in conflict if they can be interpreted harmoniously." Reading one section of the ACA as making it harder for millions of people to buy coverage, the law's defenders say, is not harmonious with the rest of the law.

But it is not so easy as all that. If lawmakers pass a law setting the legal speed limit on Highway X at 5 miles an hour, it does no good to point out that they set the limit at 55 everywhere else, and probably meant 55 in this instance too. The correct remedy is not to ignore the plain text of the law, but to fix the mistake. In the case of the ACA, Congress can't do that  since Republicans are not about to help Democrats repair a law Republicans want to undermine by any means possible.

What's more, there is reason to think the four little words might have been included intentionally  as a way to force states to create their own exchanges, rather than ask the feds to do it for them.

The lesser evidence for that theory is a video of Jonathan Gruber, one of the architects of the ACA (and of Romneycare in Massachusetts before it). In 2012, Gruber told an audience: "If you're a state and you don't set up an exchange, that means your citizens don't get their tax credits. But your citizens still pay the taxes that support this bill. So you're essentially saying to your citizens, you're going to pay all the taxes to help all the other states in the country. I hope that's a blatant enough political reality that states will get their act together and realize there are billions of dollars at stake here in setting up these exchanges, and that they'll do it."

When videotape of those remarks surfaced this summer, Gruber - recently caught on tape, twice, calling the American people "stupid" - claimed he had simply made a mistake, and had no earthly idea why he had said what he did. Yet this isn't the only time Gruber has changed his tune on the ACA. At other times, he has said the ACA was an important cost-saver, and that saving money was a "misleading" reason for the law. In any event, it would be rather curious for his mistake in explaining the law to dovetail so neatly with the purported mistake in drafting it.

And, indeed, after Gruber claimed he didn't mean what he said, a subsequent audiotape surfaced. In it, he said he was "enough of a believer in democracy to think that when the voters in states see that by not setting up an exchange that politicians in their state are costing state residents hundreds of millions and billions of dollars that they'll eventually throw the guys out. But I don't know that for sure. And that is really the ultimate threat  is will people understand that, gee, if your governor doesn't set up an exchange, you're losing hundreds of millions of dollars of tax credits?"

Gruber, of course, is just one person, and not a congressman. So while his comments are telling, they are not (as lawyers would say) dispositive. But the structure of the ACA also suggests the four little words were more than a drafting error.

For one thing, they are actually six little words: "established by the state under 1311"  i.e., Section 1311 of the ACA. Section 1311 deals with state-run exchanges. The federally run exchanges are provided for in Section 1321, which stipulates that if a state does not set up its own exchange, the Department of Health and Human Services "shall ... establish and operate such Exchange within the State." The ACA refers twice to exchanges established by the state under 1311, but never to a federal exchange established under 1321.

As Sean Davis wrote in The Federalist (the 21st-Century web magazine, not the 18th-Century papers), "The deliberate creation of a separate section to authorize a separate federal entity is not a drafting error. The repeated and deliberate reference to one section but not another is not a drafting error. The refusal to grant equal authority to two programs authorized by two separate sections is not a drafting error."

Perhaps most tellingly, the government itself has not argued that Congress goofed when it wrote those four (or six) little words. It contends that the language of Section 1321 really means HHS is acting in place of the state  that, in creating an exchange, it actually becomes the state. Therefore, an exchange established by HHS is, literally, an exchange established by a state. Orwell would be impressed.

On the other hand, Abbe Gluck (writing on Scotusblog) makes a compelling point in the other direction: According to Section 1321(f), the only people who can buy insurance on an exchange are "qualified individuals." Who is a qualified individual? A person who "resides in the State that established the Exchange." If those who are challenging the law are correct, this would mean that, by definition, federal exchanges can never have any customers.

Surely Congress could not have intended that. Then again, what Congress intended might matter less than what it actually did  no matter how nonsensical.

When everything shakes out, the best case that can reasonably be made for giving subsidies to everyone is the case made by the 4th Circuit, when it found the law ambiguous. And when a law is ambiguous, judicial restraint suggests the courts should defer to the interpretation of the agency administering the law.
In other words, if Obamcare survives this challenge, it will do so only bec

ause it was so poorly written. And that draws attention to a broader point about the ACA: It's a gawdawful law  whose implementation has been gawdawful as well.

Its individual mandate forcing people to buy insurance is a grotesque and unprecedented expansion of government power. Furthermore, the Supreme Court ratified that expansion only by embracing yet another contradiction. It did so when it decided the fine for not buying insurance is not a tax (in order to get around the Anti-Injunction Act) but also is a tax (in order not to rule against it outright). And yet that tax, supporters insist, does not raise revenue  because if it did raise revenue, then it would be unconstitutional again, since all bills for raising revenue must originate in the House while the ACA originated in the Senate.

Memo to Congress: Things like this tend to happen when you pass immensely complex legislation without even bothering to read it.